What is limitation of liability clause? | Definition from TechTarget (2024)

FAQs

What is limitation of liability clause? | Definition from TechTarget? ›

In a software license agreement, for example, the limitation of liability is one of the most important clauses because it limits the amount and types of damages one party can recover from the other party.

A limitation of liability clause in a contract limits the amount of money or damages that one party can recover from another party for breaches or performance failures. In other words, the clause can put a cap on the number of damages the organization will have to pay under certain circ*mstances.

A Limitation of Liability clause in a Terms & Conditions agreement protects against these situations that are often beyond a developer's control and helps keep them from being held liable for things such as income loss of clients affected by a short downtime.

provision in a contract stating that one of the parties shall not be liable for damages in case of breach; also called a limitation-of-liability clause. order of a court of equity to refrain from doing (negative injunction) or to do (affirmative or mandatory injunction) a specified act.

Having a well-drafted contract is one of the most important acts you can take to minimize your risks. As such, you should consider including in your next contract a limitation of liability for consequential and punitive damages.

For example, you may see your personal liability coverage with $100,000 listed next to it. This means your insurance company's limit of liability is $100,000, and it will pay claims up to that amount as long as the details fit what's outlined in your policy.

Examples of exclusions from limitations of liability include losses resulting from a breach of confidentiality, refusal to provide services, death, bodily injury, damage to tangible property, violation of applicable law, gross negligence or willful misconduct.

In the absence of negligence, bad faith or willful misconduct, none of the Sponsor, the Administrator, nor the Authorized Participant shall be liable to each other or to any other person, including any party claiming by, through or on behalf of the Authorized Participant, for any losses, liabilities, damages, costs or ...

“Limitation of Liability: In light of the limited ability of the Engineer to affect the Project, the risks inherent in the Project, and of the disparity between the Engineer's fees and the potential liability exposure for problems or alleged problems with the Project, the Client agrees that if the Engineer should be ...

Limitation of liability clauses allow parties to attempt to allocate risks, rather than transfer them wholesale to parties who are unable to bear them.

What is an example of a limitation clause? ›

An example of such a clause would state that the party would not be liable for an amount greater than the purchase price if the goods are defective.

A Limitation of liability clause in a contract has the ability to limit or even exclude a party's liability and certain types of loss. The parties to an agreement should consider the potential liabilities that may arise and then assess accordingly the limitations which may be appropriate and reasonable.

Landlord shall not be liable in any manner whatsoever to Tenant or to any third party by reason of Landlord's act or failure to act in providing or maintaining any security.

It is a contractual provision that caps or limits the extent of a party's financial liability for breaches, negligence, or other issues arising out of the performance or non-performance of the contract. It is designed to provide a degree of predictability and risk management for both parties involved.

Although a party can never limit its liability for intentional wrongdoing or willful misconduct (California Civil Code Section 1668), California courts will uphold contractual provisions limiting liability for breach of contract or ordinary negligence so long as the provision does not affect the “public interest” and ...

The clause could be held unenforceable if a court finds that the non-defaulting party has no remedies for the breach. Even in a negotiated contract, a reasonable and fair approach is sensible – if customers see aggressive caps on your liability, they may be dissuaded from working with you.

An example of such a clause would state that the party would not be liable for an amount greater than the purchase price if the goods are defective.

The indemnitor promises to defend certain types of lawsuits against the other party (indemnified claims) and to pay settlements and/or judgments. That's an obligation to perform under the contract. And limit of liability terms restrict liability for breach — for damages — not obligations to perform.

Limitations of liability (or liability caps) are common in license agreements. The amount of the cap is one of the most highly negotiated terms of the Agreement because the cap represents the maximum monetary limit that one party may need to pay the other for breaches and third-party claims under the Agreement.